Financial Times pre-election economic analysis: if Erdogan is elected…
Alan Beattie, author of the Trade Secrets column of the British financial newspaper Financial Times, wrote an analysis of the Turkish economy before the elections.
Stating that Erdogan did not leave victory to chance, Beattie claimed in his article that the president took monetary and regulatory measures to delay a potential financial crisis until the election.
‘ERDOGAN’S POLICIES THREATEN THE ECONOMY’
Beattie stated that Turkey has a structurally sound commercial economy and that Turkish manufacturing industry is at a better level than similar economies, and that Erdogan’s policies threaten the economy.
“Variable inflation, exchange rates and regulatory interventions deter domestic and foreign companies,” Beattie said. Foreign entries have also decreased in recent years. “Continuing the country’s prosperity journey will mean that Erdogan will step back from his financial and monetary ploys,” he said.
‘MONETARY POLICY’
Other highlights of the article are:
* Despite inflation reaching a 24-year high, topping 80 percent last October, Erdogan turned current monetary policy on its head by putting pressure on the central bank to lower interest rates.
* It also sought to alleviate the inevitable downward pressure on the exchange rate with a series of interventions. Last week, it was revealed that Turkey’s gross gold and foreign exchange reserves have fallen by 15 percent in the past six weeks. Reserves are dangerously close to zero.
A STRONG BUSINESS ECONOMY
* Yet despite all this irresponsible money management, a growing culture of nepotism, and the mismanagement seen in the last earthquake, Turkey has proven to be a strong enough trading economy to make up for the damage it has caused so far.
* Despite the attractive monetary policy, the Turkish economy has achieved good growth. Whereas per capita income was below 40 percent of the OECD average in the mid-2000s, it is now more than 60 percent of this average.
* Production is often the best way to reduce poverty on a large scale for middle-income economies. The manufacturing sector in Turkey accounted for 22 percent of GDP in 2021, this rate is 10 percent in Brazil and 14 percent in India. In this sense, Turkey is more like an East Asian economy (China 27 percent, Malaysia 23 percent).
* However, unlike the traditional East Asian model, Turkey’s manufacturing exports are not due to exchange rate undervaluation or suppression of domestic consumption. Türkiye runs a chronic foreign trade deficit instead of a foreign surplus.
* As stated by senior emerging markets analyst Karthik Sankaran; Turkey is exempt from the usual criticism of East Asia’s export-oriented model, which is draining demand from its trading partners.
ERDOGAN’S POLICIES THREATEN THE TRADE REGIME
* Turkey’s open trade regime is one area that Erdogan has left relatively unscathed despite his destructive economic policies.
* This are good news. The bad thing is that this model is now threatened by Erdogan’s policies. Inflation and fluctuating exchange rates and regulatory interventions deter domestic and foreign companies. Foreign direct investment has declined in recent years and the convergence of the economy with other OECD countries has stagnated since 2015.
* If the country continues on its prosperity journey, it will mean that Erdogan backs down from his financial and monetary ploys. However, this is not a reassuring expectation.